The impact of knowledge management on SME growth and profitability: A structural equation modelling study

This paper uses a structural equation modelling technique to verify a theoretically proposed model of knowledge management. The purpose of the study was to clarify the importance of different determinants of knowledge management with the aim to investigate its influence for the firm performance. The empirical analysis estimates the relationships in the structural model of the influence of knowledge management on performance using data collected through questionnaires, filled by 168 firms. The proposed model of the knowledge management consists of six main dimensions; (1) use of knowledge, (2) knowledge acquisition at individual level, (3) knowledge storage, (4) motivation, (5) measuring the efficiency of knowledge management implementation, and (6) knowledge transfer, nevertheless, the firm performance was measured by firm growth and firm profitability. To verify and confirm the relationships between the proposed dimensions, an exploratory and confirmatory factor analysis was performed. The findings indicate that all dimensions are interrelated and important for the firm performance. However, knowledge management represents a strong factor for the firm performance in the proposed model. The paper includes an approach to determine the measures of knowledge management. It is not merely a theoretical reflection, but also outlines the development of empirical model of knowledge management for the firms.